Stocks May See Early Weakness On Disappointing European Data - U.S. Commentary

4/2/2012 8:58 AM ET

After moving sharply higher over the first quarter of the year, stocks may give back some ground to start off the second quarter. The major index futures are currently pointing to a modestly lower open for the markets on Monday, with the Dow futures down by 16 points.

Disappointing European economic data may contribute to any early weakness on Wall Street, with a report from Markit Economics showing a continued contraction in eurozone manufacturing activity.

Markit said its purchasing managers index fell to 47.7 in March from 49.0 in February, with a reading below 50 indicating a contraction. The latest number was in line with a preliminary reading.

A separate report released by Eurostat showed that the unemployment rate in the eurozone rose to a record high of 10.8 percent in February.

Not long after the open, trading could be impacted by the release of some U.S. economic data, including a report from the Institute for Supply Management on activity in the U.S. manufacturing sector.

Economists expect the ISM's index of activity in the manufacturing sector to edge up to 53.0 in March from 52.4 in February, indicating a modest acceleration in the pace of growth in the sector.

The Commerce Department is also scheduled to release its report on construction spending in the month of February, with economists expect spending to increase by about 0.7 percent.

Among individual stocks, shares of Groupon (GRPN) are under pressure in pre-market trading after the company announced a downward revision to its fourth quarter results due to an increase to its refund reserve accrual. At the same time, the company reaffirmed its first quarter guidance.

Meanwhile, Avon Products (AVP) is likely to see early strength after the beauty products company said it has rejected an unsolicited takeover offer from Coty Inc. The offer valued Avon at $23.25 per share, a 20 percent premium to its closing price on Friday.

Stocks turned in a relatively lackluster performance on Friday, as traders expressed uncertainty about the outlook for the markets following the strong first quarter. A mixed batch of U.S. economic data also contributed to the choppy trading.

The major averages eventually ended the session mixed, with the tech-heavy Nasdaq posting a modest loss. While the Nasdaq edged down 3.79 points or 0.1 percent to 3,091.57, the Dow rose 66.22 points or 0.5 percent to 13,212.04 and the S&P 500 climbed 5.19 points or 0.4 percent at 1,408.47.

Despite the mixed performance on the day, the major averages all moved sharply higher for the first three months of the year. The Dow advanced by 8.1 percent for the quarter, while the Nasdaq and the S&P 500 surged up by 18.7 percent and 12 percent, respectively.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday. Japan's Nikkei 225 Index ended the day up by 0.3 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.

The major European markets have also turned mixed over the course of the trading day. While the U.K.'s FTSE 100 Index is up by 0.5 percent, the German DAX Index is nearly flat and the French CAC 40 Index is down by 0.3 percent.

In commodities trading, crude oil futures are falling $0.48 to $102.54 a barrel after declining $3.85 or 3.6 percent to $103.02 a barrel in the week ended March 30th. Gold futures, which rose $9.50 or 0.6 percent to $1,671.90 an ounce, last week, are sliding $2.10 to $1,669.80 an ounce.

On the currency front, the U.S. dollar added 0.6 percent against the Japanese yen last week, rising to 82.87 yen. Meanwhile, the greenback fell 0.6 percent against the euro to $1.334. The dollar is currently trading at 82.50 yen and is valued at $1.3312 versus the euro.